Correlation Between Cebu Air and China Southern
Can any of the company-specific risk be diversified away by investing in both Cebu Air and China Southern at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cebu Air and China Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cebu Air and China Southern Airlines, you can compare the effects of market volatilities on Cebu Air and China Southern and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cebu Air with a short position of China Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and China Southern.
Diversification Opportunities for Cebu Air and China Southern
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cebu and China is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air and China Southern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Southern Airlines and Cebu Air is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cebu Air are associated (or correlated) with China Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Southern Airlines has no effect on the direction of Cebu Air i.e., Cebu Air and China Southern go up and down completely randomly.
Pair Corralation between Cebu Air and China Southern
Assuming the 90 days horizon Cebu Air is expected to under-perform the China Southern. In addition to that, Cebu Air is 1.28 times more volatile than China Southern Airlines. It trades about -0.07 of its total potential returns per unit of risk. China Southern Airlines is currently generating about 0.03 per unit of volatility. If you would invest 40.00 in China Southern Airlines on August 24, 2024 and sell it today you would earn a total of 4.00 from holding China Southern Airlines or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cebu Air vs. China Southern Airlines
Performance |
| Timeline |
| Cebu Air |
| China Southern Airlines |
Cebu Air and China Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cebu Air and China Southern
The main advantage of trading using opposite Cebu Air and China Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, China Southern can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Southern will offset losses from the drop in China Southern's long position.| Cebu Air vs. Air France KLM SA | Cebu Air vs. easyJet plc | Cebu Air vs. Norse Atlantic ASA | Cebu Air vs. Air China Limited |
| China Southern vs. Cebu Air | China Southern vs. Finnair Oyj | China Southern vs. easyJet plc | China Southern vs. Norse Atlantic ASA |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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